The flyover effect on IPO returns

Nancy Mohan ()
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Nancy Mohan: University of Dayton

Journal of Economics and Finance, 2019, vol. 43, issue 1, No 8, 127-142

Abstract: Abstract Election politics highlighted the flyover label—those states between the two coastal regions of the US. The implication is that the interior part of the country may be viewed as behaviorally different from the coastal regions. This research considers whether this perception passes through to the financial markets. In particular, after accounting for risk and lead underwriter prestige and incorporating the fixed effects of year and industry, is underpricing of IPOs affected by company address—coastal versus non-coastal? The results of this research suggest yes—there is less underpricing for non-coastal companies. Flyover IPOs experience about 5.5% less first-day underpricing. Also, IPOs originating from the flyover states appear to outperform coastal IPOs for both one year and three years post IPO, when comparing compounded wealth relatives (assuming investment at the closing price of the first day of trading).

Keywords: Initial public offering; Underpricing; Investment banker prestige; Long-run performance (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s12197-018-9434-1

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